During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $64 per unit) Cost of goods sold (@2 $37 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $246,000 fixed each year. The company's $37 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($252,000 21,000 units) Absorption costing unit product cost $ 9 12 4 12 $ 37 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced Units sold 21,000 16,000 21,000 26,000 Required: Year 1 $ 1,024,000 592,000 Year 2 $ 1,664,000 962,000 432,000 702,000 294,000 324,000 $ 138,000 $ 378,000 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year.